Royalty amount decline!

My latest royalty check showed a drop of $45,000 from last month. I'm only 9 months into receiving royalties. That's a scary decrease.

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Permalink Reply by Rich on July 2, 2014 at 2:32am
Wow! Can I ask what u got the other 8 months. On how many acres
Permalink Reply by Dexter Green on July 2, 2014 at 2:36am

Not unusual.  ITG has declines in the Utica estimated at 80% by the end of year one. 

Permalink Reply by Frank Walker on July 2, 2014 at 2:56am

Dang!  There goes Zack's second million right down the "turlet".  That a cryin' shame, and so unfair!

(Wow!  And you figure some landowners never have had any royalty income at all;  not yet, anyway.)

Permalink Reply by Bill Barnaby on July 2, 2014 at 3:12am

The decline could be anything from price of gas, to choking the well, to typical decline. $45k loss in a month, who knew the days where we would lose more money in a month than we would make in a year LOL

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on July 2, 2014 at 3:41am

Zack,

    Take a look at the decline curves in this slide program from one of the oil company quarterly presentations. The decline is a lot faster than I thought, which was 3 years to 50% production. Now its 3 to 6 months. By the time you get the first Royalty Check your production is less than 50%. The exception could be if the well is not under full production due to the lack of a pipeline, then the drop off rate would be slower, but then the amount of production would be low to start with.

http://www.itg.com/wp-content/themes/itg-decode/energy-2013/19-Manu...

Permalink Reply by Philip Brutz on July 2, 2014 at 5:10am

Zack what state, county are you in?  Is this Utica or Marcellus?  What percentage drop is this?

Permalink Reply by Zack Jameson on July 2, 2014 at 8:36am

I'm in WV. Marshall County. It's for Marcellus. I was averaging between $1000 to $1500 per acre per month. How are these wells going to pay royalties for 20 plus years if this big decline starts so quickly? I always thought production was fairly constant for the first 3 or 4 years?

Permalink Reply by bungalow_steve on July 2, 2014 at 8:41am

No, they drop very quickly the first several years, then they pay steadily for a long time at about 20% of first years rate.

Permalink Reply by John Tropea on July 3, 2014 at 5:27am

That's unbelievable. I am Wellsboro PA and either there is not much gas or were are being robbed by Shell / Ultra. Our royalti

Permalink Reply by Jeff Kerr on December 31, 2014 at 9:26am

If the decline rate is so fast why do companys still want to buy the acres My guess is the decline rate is made up by the O & G CO.'S  TO ROB THE LAND OWNER  I do not trust none of them.  

Permalink Reply by David Perotto on July 2, 2014 at 6:10am

Attached is a real world decline. The Wagner and Boy Scout's first full quarters were 4th quarter 2012. The results for that quarter and the next 4 (2013) are on the attached spreadsheet. In five quarters they decline over 80% from the first full quarter. Pretty steep decline. I imagine they will improve that , similar to how the operators in the Eagle Ford have gotten better at extending total recovery. Tweaking chokes is a big factor and possibly restimulation.

Attachments:
Permalink Reply by bungalow_steve on July 2, 2014 at 6:35am

Zach, A big abrupt decline like that over one month is usually due to shutting off wells for maintenance (you have 11 wells correct?), choking, or a big drop in gas price, but NOT due to a decline in raw production capability output per well. Unless water is getting into all the wells from a formation beneath (rare). Also could be accounting issues (adjusting for past mistakes).

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